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Paul Krugman’s ‘Twilight Zone’ Economics

Posted on Aug 15, 2011
Youtube / eyezopenwide2

Nobel Prize-winning economist Paul Krugman employed a bit of imagination while discussing the need for fiscal stimulus on Fareed Zakaria’s “GPS” last week, playfully suggesting that the discovery of an impending alien attack would force the American Congress to shelve debates about inflation and budget deficits and spend at a rate that would end the current recession in a year and a half.

“If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat, and really, inflation and budget deficits took secondary place to that, this slump would be over in 18 months,” he mused. “And then if we discovered, ‘Whoops! We made a mistake. There aren’t actually any space aliens ...’ ” the spending would leave us better off.

“There was a ‘Twilight Zone’ episode like this in which scientists fake an alien threat in order to achieve world peace,” he added. “Well, this time, we don’t need it, we need it in order to get some fiscal stimulus.” —ARK


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blogdog's avatar

By blogdog, August 17, 2011 at 11:16 pm Link to this comment

RE: “I never tire of saying that unless taxes are raised considerably, the situation of the Middle Class and especially the poor (who will have even more difficulties finding decent jobs) will deteriorate.”

Curious that the idea of the Tobin Tax (Wall Street Sales Tax) is so ignored - all but 5 states impose a Sales Tax on most consumer items and many cities (some even on necessities) - some as high as 12% - yet there is no similarly substantive tax on financial transactions - think what even 1% would garner from the trillions that change hands daily.

Of course such a tax would dampen wildly fatuous computerized speculative transactions, executed on hair-trigger margins - but, so what - most of that is wasteful at best, damaging at worst - and, as for derivatives - re-criminalize them, except for farm commodity futures where they are an honest hedge for essentially productive business - but all so-called ‘naked’ trading (especially shorting) should be criminalized - it makes a mockery of what honest capitalization of productive enterprise is all about - what, if any convincing argument, can be made for tolerating such abusive speculation? 

... just last week…

Short-selling banned in 4 European countries August 12, 2011 Associated Press

PARIS (AP) — France, Italy, Spain and Belgium are banning short-selling on select stocks amid efforts to calm market turmoil that has sent bank shares gyrating wildly and aggravated worries about Europe’s huge debts.

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By radson, August 17, 2011 at 7:49 pm Link to this comment

Hello TDers :The problem is actually very simple .It’s not about DEBT per se ,Its more closely
related to What Mother Nature can supply .There is NO mathematical solution to Society and there never will .Human Beings are not ROBOTS ,basic ‘needs’ have always remained the same and destiny is every one’s prerogative .

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Anarcissie's avatar

By Anarcissie, August 17, 2011 at 7:37 pm Link to this comment

Well, I would say that in the absence of war and technological disruption, under capitalism the rich get richer and the poor get poorer.  Of course, as Marx pointed out in the Communist Manifesto, the bourgeoisie cannot exist without constantly revolutionizing the means of production.  And, I might add, carrying on aggressive foreign war and imperialism, or at least so history seems to teach us.  So as the rich get richer and the poor get poorer, countervailing forces could be expected to come into play.

I suggest that this has already happened—that war and technological disruption (for example, the rise of China as a great industrial power) are destroying the position and power of the United States.  The rich will get richer and the poor will get poorer for awhile longer, but probably not a great while.  What comes after that may be rather unpleasant for everybody.  But that’s what happens when your ruling class is incompetent.

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By Lafayette, August 17, 2011 at 9:38 am Link to this comment


Anar: It’s sort of scary to contemplate, but it’s quite possible that the ruling class are no more competent and knowledgeable than the rest of us.

They don’t have to be competent. They hold all the cards.

All they need do is maintain the status quo. The present taxation schedules allows them and will allow their inheritors to garner the very major portion of all Income (both earned and unearned)  in the US, which translates directly into Wealth.

I never tire of saying that unless taxes are raised considerably, the situation of the Middle Class and especially the poor (who will have even more difficulties finding decent jobs) will deteriorate.


It then becomes a question of “When does it all explode into social violence?” Have you not seen what happened in the UK? Believe me, gun laws in the UK are draconian - their youth do not have an easy access to machine guns as do America’s youth.

The Social Safety Valve is the ability of a society to attends to some very basic needs that allows people to live decently. That safety valve is beginning to fizzle.

And the Crazies want to reduce entitlements even further? Heaven help us.

I’m no Cassandra but given the bizarre Income Unfairness in the US, then civil violence is certainly not out of the question.


We have come a long way since the Revolutionary War, but I wonder what real change has been made.

We may no longer have a Landed Gentry (without the aristocratic titles) whose riches came from Agriculture at the time of the Revolutionary War, but we do have a plutocracy whose wealth derives from other sources (Industry, Finance, Inheritance).

Nontheless both, then and now, represent very minor percentages of the total population. For an interesting historical view of land ownership in America read this about William Penn. Was Penn so unique?


Is our world all that different after 250 years of existence? The rich get richer and the poor buy lottery tickets. Have we built a de facto American Royalty that rules over us in a fictional democratic state.

And, if so, why in hell did we ever let that happen?

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By Hulk2008, August 17, 2011 at 8:59 am Link to this comment

What’s that you say?  There ARE no aliens?

PLEASE don’t tell Hollywood or the Sci-Fi Channel or the writers or the Ghost of Ronald Reagan ....... don’t even tell Michelle Bachmann.

I enjoy sci-fi for many reasons - even when the aliens win ala “Skyline”.

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Napolean DoneHisPart's avatar

By Napolean DoneHisPart, August 17, 2011 at 8:18 am Link to this comment

Here is the plan, sir… succinctly explained by this journalist:

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Anarcissie's avatar

By Anarcissie, August 17, 2011 at 8:09 am Link to this comment

I don’t see any plan.  It’s sort of scary to contemplate, but it’s quite possible that the ruling class are no more competent and knowledgeable than the rest of us.

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By Napolean DoneHisPart, August 17, 2011 at 7:30 am Link to this comment

So many do not see the presence of design.

The country of Amerika is being ruined according to plan, to be brought down to a level playing field with many of the other countries around the world.

Notice how the introduction of the Euro and forced acceptance of many more prosperous countries brought those countries level with poorer / less productive countries?

The empire has instilled its central bank in every country the world over ( short of N. Korea, Cuba, Iran and few other ‘rogue’ nations ).

The fiat currency, able to be fluctuated at-will, the payment of interest ( tribute ), and that rate able to be changed at a moments notice, is one of the many instruments of tyranny and sifting of the masses, but who sees or understands this?

The increase of law continues to limit the freedoms and liberties of the soveriegn, now turned back into a citizen / subject… soon to be serf.

Going to the moon, or little green men coming from planet Whatever, is simply a good reason to buy and sell things and keep the empire’s Babylonian system of commerce rolling…. to keep people on the dole, keeping their eyes and their faith in what is created ( money, material possessions, etc ) and keep the lower classes separated, with the hegemony enjoying the efforts and labors of the divided, distressed and distracted masses.

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Anarcissie's avatar

By Anarcissie, August 17, 2011 at 5:19 am Link to this comment

Krugman’s fantasy exhibits the authoritarianism which has unfortunately become part of the progressive mentality.

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By Marian Griffith, August 17, 2011 at 3:12 am Link to this comment
(Unregistered commenter)


What the blazes have the jews done to you that you drag them into every conspiracy theory filled diatribe?

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Lafayette's avatar

By Lafayette, August 16, 2011 at 10:43 pm Link to this comment

MAG: Digging ditches and then filling them up or making weapons can offer workers income which will in turn be a stimulus to the economy over the short run.

America’s infrastructure, particularly its roads/highways built by Eisenhower, is in dire need of repair. There is no need to dig ditches and fill them up, the DoD does enough of that. Bridges are being closed everywhere because they are unsafe. Though some roads to nowhere got built, those roads/bridges to somewhere are in need of attention.

These are baseline items for a functioning economy over an expanse of land that is enormous. Most of those items bought at your local supermarket were trucked by long-haul of our national highways system, that was largely built decades ago.

The money would be well-spent and it would provide jobs at a skill-set level where they are really needed. Which would then spend money on other goods/services thus boosting the economy generally, known as the Multiplier Effect of Stimulus Spending.

Krugman is not wrong, he just employed a metaphor that would get attention on a media that needs exaggeration to wake people up from the generalized stupor in which they live.

And, of course, if he had proposed cutting a $100B from the Defense budget (to, say, lay a fiber-optic cable to every home in America - which would have been truly useful), everybody would pay attention to that “gaffe” and not the need for Stimulus Spending.

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By Hulk2008, August 16, 2011 at 5:08 pm Link to this comment

Sorry I misspelled Bob Culp’s name - I got hung up on the Krugman K.

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Anarcissie's avatar

By Anarcissie, August 16, 2011 at 1:13 pm Link to this comment

No, I don’t think the ruling class is that coherent or competent.  They’re just going to drive off the cliff.  After that they won’t need any complicated plots.

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Napolean DoneHisPart's avatar

By Napolean DoneHisPart, August 16, 2011 at 11:43 am Link to this comment

Something will be ‘showed’ on the media in order to bring tyrannical rule… just watch and wait for it.

Do you think the gestapo / Zionist agenda will not capitalize on the hoax of 2012.. with the Mayan calendar.. or the ‘new age religions’ spouting their answer to Christ? 

Do you really think these vile dark hearts will NOT at least try some world-wide message of madness ( kabuki theater ) to further their exploits?

Thing is, how many will actually believe the baloney.. or will simply go along because out of fear of not making next month’s bills.. but more are waking up everyday to the charade.

The actors behind the kabuki theater may not find caves and crevices enough to hide from those they subdue and enslave.

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Anarcissie's avatar

By Anarcissie, August 16, 2011 at 11:20 am Link to this comment

An impending alien invasion would be a reason for a military dictatorship.  Krugie’s affection for that sort of thing, like his affection for inflation (that is, robbing the poor of their savings) is pretty repellent.

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By Hulk2008, August 16, 2011 at 9:02 am Link to this comment

It was Outer Limits, starring Robert Kulp (later was Cosby’s spy sidekick).  Kulp’s character underwent extensive surgery and training to not only look but BE scientifically “alien”.  Unfortunately (and most ironically) the alien crash landed and was shot by a couple of rednecks out hunting before his mission could be completed.
  Kulp also starred in an Outer Limits episode “Demon With A Glass Hand” in which he saved the human race by keeping it digitally recorded on a thin wire in his glass hand - he was an artificial person (android) who evaded and defeated aliens seeking to kill off humanity.  Until the character got all his fingers together, he neither knew of the wire or the fact that he was NOT a human himself.
  And all this points to the fact that no matter how logically or carefully knowledgeable well-meaning folks might prepare a solution to the nation’s ills, it only takes a freak accident or some bonehead joker to set things awry. 
  We will probably be done in by greedy in-fighting.

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By sharon, August 16, 2011 at 4:29 am Link to this comment
(Unregistered commenter)

Krugman is a smart man. I think his point had more to
do with illustrating how hard it is to get the
teapartyrepublicans to focus on real fiscal issues
instead of the fantasy fiscal issues they keep

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By charliedontserf, August 16, 2011 at 3:17 am Link to this comment

First off it was an Outer Limits, second off the point at the end was that even when our intentions are good, if we’re not aligned with the truth nothing good will come of your efforts.

Last summer someone in a group conversation said “yeah, but war is good for the economy. I waited to see if everyone agree. There were no objections. I then pointed out that after 10 years of war, and 60 years of Cold War style military spending our economy is in the shitter. Wasn’t that a sort of Orwellian double think statement? Everyone agreed with me - but I bet you, if asked today, they would all chime the mantra “war is good for the economy”
Incidentally, the reason the American economy took off after WWII has a lot more to do with the fact that the rest of the industrialized war was a giant pile of cinders than it does with this Keynesian stuff. Besides government spending fell dramatically in 1946 - Krugman would say that the economy should have fallen, but it did the opposite.

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By johnnyfarout, August 15, 2011 at 2:54 pm Link to this comment

Didn’t Ronnie Rayguns give a speech along these very same lines back in the 80’s? Invent star wars technology and then share it with the Ruskies, in order to fight the planetary battles and gear up for off planet warfare? Thus, stimulating the world’s economies through fear and paranoia…, this had been working so well for decades! If only the teapers would get on board the outer space train and stop being paranoid about all the wrong planet load of aliens… if capitalist free market place economic downturns are all in our minds…oh dear what else is there that is just a splendid ideology away?

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By Mark A. Goldman, August 15, 2011 at 2:11 pm Link to this comment
(Unregistered commenter)

I wish Krugman wouldn’t talk like that.  Digging ditches and then filling them up or making weapons can offer workers income which will in turn be a stimulus to the economy over the short run.  But even though this is true, it would be a lot better if instead of digging ditches or making war, we would instead create something useful like improving educational opportunities for students or building an infrastructure using non-carbon based energy resources.  That would not only help the economy and the workers who earn salaries doing those tasks, but also help everyone else at the same time.  It is unfortunate that our elected leaders aren’t usually willing to do thoughtful things, but rather are satisfied with making war and doing other things that in the long run put money into the economy while at the same time destroying what already exists or adding directly or indirectly to the suffering of others.

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